Press releases

Health of UK DB schemes now far stronger than pre-COVID-19 levels

12 May 2021

Full press release


DB schemes in the UK can expect to pay 98.2% of accrued pensions benefits

This marks the fourth consecutive quarter of improvement and is up nearly 7% from the market lows in March 2020

The health of the UK’s Defined Benefit (DB) pension schemes has continued to improve from the sharp decline experienced at the start of the pandemic and is now far stronger than even their pre-COVID levels, according to Legal & General Investment Management (LGIM).

LGIM's Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to pay 98.2% of accrued pension benefits as of 31 March 2021, up 6.8% from 31 March 20202.

The health of the UK’s DB pension schemes has also shown a 1.1% improvement quarter on quarter against the funding level of 97.1% at 31 December 2020³. This latest improvement means LGIM’s measure has shown a continuing improvement in each of the last four quarters.

However, it is important to note that these figures may yet still understate the negative impact of the pandemic, due to a weakening of covenants that many schemes will have endured.

John Southall, Head of Solutions Research at LGIM: "The first quarter of 2021 was yet another good period for our Expected Proportion of Benefits Met (EPBM) measure of scheme health, with the ratio rising by 1.1% from 97.1% at 31 December 2020 to 98.2% at 31 March 2021. The change was largely driven by a rapid rise in nominal interest rates, the sharpest three month increase seen in years, benefitting schemes that haven’t fully hedged their interest rate risk.

These benefits were partially offset by a rise in expected inflation (increasing inflation-linked liabilities) but growth assets also posted a strong quarter, boosting asset values. One notable feature of our EPBM measure is that it cannot exceed 100%. As the EPBM figure edges closer to 100%, continued positive experience for schemes has a smaller marginal impact on our measure.

From a covenant perspective we chose to retain a typical sponsor rating assumption of BB in our calculations as confidence in the recovery improves. Whilst the long-term impact of the pandemic remains unclear, fiscal and monetary actions have been extremely supportive. We noted that if a rating of B was assumed, the EPBM figure at 31 March 2021 would be around 1.1% lower."

Christopher Jeffery, Head of Rates and Inflation Strategy at LGIM: "The global reflation trade played out in force during the first quarter. The consensus continued to mark up its 2021 growth outlook on the back of fiscal stimulus and the vaccine roll-out. US Treasury yields rose more in Q1 than any quarter since 2016 Q4. There are clear parallels with that episode: a sharp move higher in US sovereign funding costs driven by political transition that dragged up yields everywhere.

Risk assets remained immune to that reset in discount rates with equity markets supported by a stronger earnings backdrop, and credit markets enjoying abnormally low default rates. There are a few hints of inflation concern entering the market narrative with breakeven inflation and commodities moving higher since the turn of the year. The fate of inflation as economies around the world reopen will make or break the market dynamic over the rest of the year."

  1. Based on the Purple Book from the Pension Protection Fund, a typical pension scheme holds approximately 20% in equities, 70% in bonds/LDI, 5% in property and 5% in other assets.  For illustration, we assume rates and inflation hedge ratios of 70% of liabilities on a gilts basis (revised upwards from previous assumptions) and no future accrual or deficit contributions.
  2. As of 31 March 2020, the LGIM DB Health Tracker found that pension schemes could expect to pay 91.4% of accrued pension benefits.
  3. As of 31 December 2020, the LGIM DB Health Tracker found that pension schemes could expect to pay 97.1% of accrued pension benefits.

Further information

Notes to editors

Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with over £1.2 trillion in total assets under management* of which a third is international. We also provide powerful asset origination capabilities. Together, these underpin our leading retirement and protection solutions: we are a leading international player in pension risk transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Through inclusive capitalism, we aim to build a better society by investing in long-term assets that benefit everyone.

*at 31 Dec 2022

Legal & General Investment Management

Legal & General Investment Management is one of Europe’s largest asset managers and a major global investor, with total assets under management of £1.29 trillion1. We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.

For more than 50 years, we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property, and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.

1Globally, we manage assets of £1.42 trillion or CHF 1.75 trillion as at 31 December 2021 (source: LGIM internal data as at 31 December 2021). The data combines assets under management by LGIM in the UK, LGIMA in the US and LGIM Asia in Hong Kong. Assets under management include securities and derivatives positions.

*at 11 Jan 2023


Past performance is not a guide to the future. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. For illustrative purposes only. Reference to a particular security is on a historical basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security. Views expressed are of LGIM as at 3 January 2023.


In the European Economic Area, it is issued by LGIM Managers (Europe) Limited, authorised by the Central Bank of Ireland as a UCITS management company (pursuant to European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (S.I. No. 352 of 2011), as amended) and as an alternative investment fund manager with "top up" permissions which enable the firm to carry out certain additional MiFID investment services (pursuant to the European Union (Alternative Investment Fund Managers) Regulations 2013 (S.I. No. 257 of 2013), as amended). Registered in Ireland with the Companies Registration Office (No. 609677).  Registered Office: 70 Sir John Rogerson's Quay, Dublin, 2, Ireland. Regulated by the Central Bank of Ireland (No. C173733).

LGIM Managers (Europe) Limited operates a branch network in the European Economic Area, which is subject to supervision by the Central Bank of Ireland. In Italy, the branch office of LGIM Managers (Europe) Limited is subject to limited supervision by the Commissione Nazionale per le società e la Borsa ("CONSOB") and is registered with Banca d'Italia (no. 23978.0) with registered office at Piazza della Repubblica 3, 20121 Milan, (Companies' Register no. MI - 2557936). In Germany, the branch office of LGIM Managers (Europe) Limited is subject to limited supervision by the German Federal Financial Supervisory Authority ("BaFin"). In the Netherlands, the branch office of LGIM Managers (Europe) Limited is subject to limited supervision by the Dutch Authority for the Financial Markets ("AFM") and it is included in the register held by the AFM and registered with the trade register of the Chamber of Commerce under number 74481231.Details about the full extent of our relevant authorisations and permissions are available from us upon request. For further information on our products (including the product prospectuses), please visit our website.